Since digital recording offers essentially perfect reproduction—on compact discs, digital audiotapes, or digital videodiscs—audiophiles can accumulate vast collections of music, transferring them from one format to another, copying it, and digitally altering it with little effort and not damaging the sound quality.
Option Elimination -
(A) music, transferring them from one format to another, copying it, and digitally altering it with little effort and not damaging - Comma + ING is adverbial modifying "audiophiles can accumulate." Here, "transferring," "copying," and "altering" are okay but "damaging" after and is not parallel to these modifiers as it's after the second and which connects "little effort" and " not damaging," which is not parallel. Moreover, a switch from them to it is not good.
(B) music, transferring it from one format to another, copying it, and digitally altering it with little effort and no damage to - ok
(C) music, transferring them from one format to another, copy them, and digitally alter them with little effort and no damage to - "copy" is a verb, while others are ING modifiers. Not parallel.
(D) music and transfer it from one format to another, copy it, and then digitally altering it with little effort and not damaging - a total mess of meaning and modifiers. First, the "audiophiles" are not transferring anything. Transfering is an effect of "audiophiles can accumulate vast collections of music." Moreover, "copy" is a verb, and then we again have "altering" as an ING modifier.
(E) music and transfer it from one format to another, copying it, and digitally alter it with little effort and no damage to - The "audiophiles" are not transferring anything. Transfering is an effect of "audiophiles can accumulate vast collections of music."